As Europe Lags, America Builds a Drone Empire

AlamyA US Navy X-47B Unmanned Combat Air System aircraft is towed into the hanger bay aboard the aircraft carrier USS George H.W. Bush -- the first aircraft carrier to successfully catapult launch an unmanned aircraft from its flight deck.
With a fiscal 2013 defense budget of nearly $614 billion, the United States is widely known to be a big spender on defense. By some estimates, U.S. defense spending accounts for nearly 60 percent of the $1.19 trillion the top 10 military powers spent on defense in 2011. In fact, our country allocates more than five times more money to defense than does its closest spending rival, China.

And that's not the half of it. In the cutting-edge field of military unmanned aerial vehicles, the United States has such a huge lead over its rivals that it makes their combined UAV fleets look like a rounding error in a world that's essentially 100 percent dominated by U.S. drones.

Pax Americana

As The Wall Street Journal recently reported, the U.S. military commands a fleet of 429 "large drone" aircraft such as the General Atomics Predator andNorthrop Grumman (NOC) Global Hawk.

Meanwhile, America's smaller drones, built by everyone from Boeing (BA) to Textron (TXT) to tiny AeroVironment (AVAV), maker of the ubiquitous Raven man-portable UAV, number in the thousands.

In contrast, the military of the United Kingdom, not even a U.S. rival but a close ally, boasts a fleet of precisely 10 large drones, most of which we built for them, and the rest imported from Israel. Italy has nine, France, four, and Germany has three.

As a result, when allied forces need a drone to "put eyes" on a target, more often than not, they have to ring up the U.S. military to get one.

Who You Gonna Call?

For allied nations, that has to be embarrassing -- but it's a situation unlikely to change soon.

As the Journal reports, European defense giant European Aeronautic Defence & Space (EADSY), the parent company of Airbus, is only just now beginning to test a prototype pilotless helicopter -- whereas in the U.S., pilotless helos from Northrop called "Fire Scouts" have been in active service for years.

%VIRTUAL-article-sponsoredlinks%True, European defense contractors such as EADS,BAE Systems (LSE: BA), and Dassault Aviation have succeeded in putting a few smaller drones in the air, and have dreams of prototypes of larger craft. But budget cuts, exacerbated by an ongoing economic crisis and also "territorial" squabbling among EU governments over ownership of defense companies, have hobbled the Continent's ability to develop robotic aircraft of any real size or capability.

By some estimates, Europe is as much as 10 years behind the U.S. in drone technology development.

The World Is Our Unmanned Oyster

In the absence of a "homegrown" drone program, Europe remains largely dependent on the kindness of strangers for its drones -- in other words, the willingness of U.S. companies such as Northrop and General Atomics, and Israeli firms like Israel Aerospace Industries, to sell them the large drones they need.

Right now, France is in the process of petitioning the U.S. Congress to sell it 16 General Atomics Reaper drones. If and when the sale goes through, though, it should mean at least $1.5 billion for General Atomics.

In future years, U.S. defense contractors could rack up even bigger sales.

Australia, for example, already a patron of Israel's IAI, is gearing up to spend hundreds of millions of dollars on a new maritime surveillance drone (dubbed "BAMS") being developed by Northrop Grumman. Aerospace consulting firm Teal Group, based in Reston, Va., estimates that by 2023, the global drone market could grow to as much as $11.6 billion in annual sales.

For the time being -- and perhaps for as much as a decade in the future, until Europe catches up -- most of these sales should be ours for the taking.

Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends AeroVironment. The Motley Fool owns shares of Northrop Grumman and Textron.